What are fixed-price contracts and liquidated damages? Which party to the contract bears the burden?
What will be an ideal response?
Both are financial incentives, although the latter functions more as a stick than the (somewhat limited) carrot of the former. Fixed price contracts establish a price for the project before work begins. If the project encounters difficulty, the costs of completion are borne by the project organization. Liquidated damages are penalty clauses that are automatically activated at milestones in the project's development and implementation. The project organization is again on the hook for these penalties.
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Lake Country Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances
Lake Country has four public relations specialists plus an office staff. At the beginning of the year, Lake Country estimated the total cost of salaries and benefits for the public relations specialists at $672,000 and a total of 7,000 billable hours for the year. The office and administrative costs were estimated at $406,000. The allocation base for office and administrative costs is billable hours. In June, Lake Country signed a contract for a Russian ballet performance. It negotiated a price of $6,500 for its services. When the job was complete, Lake Country's records showed that it had logged 38.0 billable hours. What was the amount of gross profit that Lake Country made on the job? A) $6,500 B) $3,648 C) $648 D) $2,204
Rising corporate profits are likely to have the greatest effect on which of the following industrial sectors?
A) business equipment B) defense C) food and agriculture D) consumer durables